Power Generation

The Company's power generation segment is represented by a fully vertically integrated chain, from generation to transmission and distribution of heat and power to external consumers (commercial power generation) and for own needs (supply power generation). The aggregate power generation capacity of the Group entities is 5.8 GW, with commercial power generation accounting for 73% and supply power generation accounting for 27%. Power generating facilities in the Group's asset portfolio help strengthen vertical integration and ensure high APG utilization rates while at the same time reducing electricity costs at its production facilities.

The sector secures reliable supply of heat and power both to cover the Company's in-house needs (generating facilities of the Upstream and Downstream) and meet the demand from outside consumers of heat and electric power in the South and North-Caucasian Federal Districts of Russia. That is the reason why the sector has embarked on the following development paths:

develop local generating facilities at the Company's oil producing and refining facilities

develop renewables.

COMMERCIAL ELECTRICITY OUTPUT

HEAT SUPPLIES

POWER OUTPUT OF POWER PLANTS*, MLN. KWH

* Exclusive of smaller power generation facilities.

COMMERCIAL POWER GENERATION

The Group’s main commercial heat generating facilities are located in the south of the European part of Russia. In particular, LUKOIL accounts for 99% of electricity generation in the Astrakhan Region and 62% in the Krasnodar Territory.

In 2016 the Company completed the investment cycle in commercial power generation, driving a significant reduction of capital expenditures.

LUKOIL-KUBANENERGO

LUKOIL-Kubanenergo commenced its operations in July 2009. The Company's generating facilities are situated in Krasnodar Territory. The LLC LUKOIL-Kubanenergo assets include CCGT-410 MW and Krasnodar TPP.

Entity website

LUKOIL-ASTRAKHANENERGO

LUKOIL-Astrakhanenergo commenced its operations in July 2009. The assets of LUKOIL-Astrakhanenergo include 110 MW CCGT Unit, Astrakhan TPP-2, and 25 boiler-houses (Astrakhan).

Entity website

LUKOIL-STAVROPOLENERGO

The assets of LUKOIL-Stavropolenergo include the Kislovodsk TPP and 1 boiler-house. Starting 2013 the boiler-house has been successfully operating 3 gas reciprocating units with an aggregate electrical capacity of 5.3 MW. In 2014 they completed a 135 MW CCGT Unit project in Buddenovsk.

Entity website

RENEWABLES

The Group's major renewable energy assets are located in Russia (four HPPs with an cumulative capacity of 296 MW, output of 765 GWh in 2016).

The Group also operates two solar power plants at its own refineries with a capacity of 9 MW in Romania and 1.3 MW in Bulgaria. These plants, built on unused industrial sites within the refineries, supply electricity to local grids. A similar project to build a 10 MW solar power plant is currently underway at the Volgograd Refinery.

In addition, the Group owns the 84 MW Land Power wind power plant in Romania, which benefits from state support to renewable power generation.

LUKOIL-ENERGY AND GAS BULGARIA

Established as a spin-off from LUKOIL-Neftochim Burgas. Operations commenced in 2008. Since 2011 the Entity has been operating a 1.25-MW PPP. In 2015, the 257 MW Burgas TPP exited the Bulgarian electric power market and refocused on meeting the requirements of refineries, thus TPP moved into the category of in-house power generation facilities (smaller generating facilities).

LUKOIL ENERGY AND GAS ROMANIA

Established through a spin-off from Petrotel-LUKOIL. The Entity operates 9 MW and 1.25 MW solar power plants and a 84 MW wind power plant.

Entity website

SUPPLY POWER GENERATION

Development of in-house electricity generation at its fields and plants helps the Group to reduce its electricity costs and increase the APG utilization as a fuel for gasfired power plants.

In-house generation accounts for 26% of the total electricity consumption for production purposes across the Group.

In 2016, supply power generation at the Group's oil and gas production, processing and distribution entities totaled 5,339 million kWh, up 27% year-on-year.